How to Manage Your Personal Credit

Managing your credit is a good first step to financial freedom. Some people ignore their credit until they really need a loan now, then it is too late to fix it. If you have any hope of buying a home, a car, or even getting a job these days, it is essential to pay attention to your credit.

Get a Free Report

Begin by getting a copy of your credit report, preferably from all of the reporting agencies.  You are allowed to request one free credit report per year from each of the three major agencies.

Check History

Besides knowing your credit score, which affects things like the interest rate you can get on a car loan or how much you qualify for in a mortgage, a credit report gives you other information about yourself.  You might be surprised to see what your total credit card debt is, for example.  It’s easy to lose track of how much we owe until it’s all written down in one place.  You might be surprised to see a store card you used as a college student has been paid in full – or still has $40 owing on it that you forgot about!

Verify Data

Also, verify all information provided.  Some people learn they’ve been the victims of identity theft or credit card fraud due to erroneous information on their credit reports.  There are options for disputing charges that aren’t yours, just follow the proper directions for each company.

Take care of any back debt when you realize you have it.  Even making very small payments looks better than no payments at all.  Pay off smaller bills in their entirety if you can.  While many places don’t count medical debt against you, paying the dentist that $75 deductible you still owe creates a history of taking care of responsibilities.

Add to the Credit History

You might discover that it’s hard to get a car loan because your credit history is good but there isn’t enough of it.  In that case, try getting a store credit card or a gas card if you can’t get a bank card.  Use it once or twice and put it away, then pay it off.  If you don’t charge more than you spend in a month it should be easy.

Remember that credit card companies make their money on the interest they charge, so they don’t want you to pay it off too quickly.  The minimum payment doesn’t always pay the loan off in a timely fashion.  If you have a card that you can’t pay off every month – say an emergency card and you just needed to replace your transmission – do make a payment greater than the minimum.  The faster you pay it off, the less the borrowed money costs you.

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